The NT dollar rose for a fifth day on speculation exporters were converting their overseas sales into the local currency before the Lunar New Year holidays that start tomorrow.
The dollar closed at the highest since June 2006 on speculation demand will increase for the currency as interest-rate reductions by the US Federal Reserve pushed the US benchmark rate below that of Taiwan's. The US rate is at 3 percent, compared with 3.375 percent in Taiwan. A higher interest rate boosts returns on deposits and bonds.
"We typically see exporters' US dollar sales before the Chinese New Year as they want to exchange foreign currencies to the Taiwan dollar before the long holiday," said Sadaaki Kondou, assistant general manager of treasury at Mizuho Corporate Bank Ltd (瑞穗實業銀行) in Taipei. "The interest-rate gap between the US and Taiwan now favors the Taiwan dollar."
The NT dollar advanced 0.3 percent to NT$32.070 against the US currency at the 4pm close of onshore trading, according to Taipei Forex Inc. It may strengthen to NT$31.95 by the end of today's trading, Kondou said.
Sovereign wealth funds have been buying the Taiwan dollar in anticipation it will appreciate, the Chinese-language Commercial Times said, without citing a source.
The central bank didn't confirm or deny the report, the newspaper said. The central bank has been intervening by curbing the local currency's gains in the final minutes of trading each day, the report said.